MIDLANDS ENGINE REGIONAL ECONOMIC IMPACT MONITOR EDITION 15: MAY 2021
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MIDLANDS ENGINE REGIONAL ECONOMIC IMPACT MONITOR EDITION 15: MAY 2021
Executive Summary
The continued easing of lockdown restrictions in recent weeks has provided a much-needed boost to many
businesses and local economies. There have been reports from business groups of a general feeling of
entrepreneurial spirit with businesses starting to return to more “normal” activity. All sources are now pointing to a
marked improvement in business confidence as a result of the progressive re-opening of the economy in line with
the Government Roadmap, alongside the continued success of the vaccine roll out.
• The West Midlands Business Activity Index increased from 60.7 in March 2021 to 65.9 in April 2021 – the sharpest
increase since records began in 1997. The East Midlands Business Activity Index increased from 54.0 in March
2021 to 56.7 in April 2021 - fastest rate of output growth since September 2020.
• Results from the New Business Index and the Future Activity Index have also broken records in the region.
• Manufacturing output grew at the fastest rate since December 2018 – the first material growth reported in
almost two years – according to the CBI’s latest monthly Industrial Trends Survey.
• UK consumer spending rose above pre-pandemic levels for the first time in 2021, reflecting a boost for retail.
Despite cautious optimism in the business environment, there are still many issues surrounding Covid-19, not least
the recent worry and uncertainty surrounding the Indian variant and its impact on the easing of restrictions
roadmap. This is of particular concern to public facing industries such as events, conferencing, and the visitor
economy. Furthermore, the full scale of Covid impacts is still somewhat masked by ongoing government support.
• Job losses post-furlough: Concerns remain about the scale of employment loss once furlough comes to an end,
and added to this localised shocks are threatening jobs.
- As of the 31st March 2021, 566,000 employments were still furloughed in the Midlands Engine region.
- 3 West Midlands Liberty Steel premises are due to be sold and GKN confirmed it will close its Birmingham factory
in 2022, while there remains a shortage of semi-conductors which is damaging output in automotive.
- Claimants have fallen thus far though: there were 416,405 claimants aged 16 years and over in the Midlands
Engine area in April 2021, a decrease of 4,955 claimants since March 2021.
• Financial distress: Concerns related to company debt levels, particularly among small businesses.
- 723,000 UK businesses are now in ‘significant financial distress’. This represents a 15% increase from Q4 2020 to
Q1 2021, reflecting an additional 93,000 businesses.
- Anecdotally, there has been reports of firms being resistant to investment, stemming from an inability to plan
ahead for opportunities and challenges.
There is also sector-specific challenges that are threatening the general buoyancy and more positive outlook:
• The construction industry is in the midst of a supply crisis. From roof tiles to steel, timber to insulation, paint to
kitchen sinks, products are scarce and, when found, they’re expensive.
• Hospitality premises are struggling to recruit enough staff meaning that some premises are unable to fully
reopen or operate with reduced hours.
• The relative buoyancy of consumer spending has been counteracted by a continued wave of retail closures.
It remains difficult to detach EU Exit and Covid-19 impacts from one another, but “on the ground” business issues
may be now coming through in recent trade data, showing that UK-EU trade plunged almost 25% in the last quarter.
Real-time issues caused by ongoing economic instability continues to highlight and exacerbate societal inequalities.
The challenge of “levelling-up” across the UK and within regions such as the Midlands is now the centre of attention
within regional and national policy. More in-depth evidence - from the CBI and the UK Prosperity Index – reinforces
our understanding of places and provides consideration for policies that deliver more inclusive growth. In these
studies, parts of the Midlands are highlighted as relatively deprived and less prosperous, while overall our region
lags behind national averages in some respects. This reinforces the important challenges the region faces.
Levelling-up is complex, with many facets and contributing factors. In this month’s monitor, we explore key thematic
areas and their influence on levelling up. The elements of levelling up we consider in equal measure are: skills,
business and investment, digital, health, the rural economy and social mobility. As the Midlands re-emerges and
revitalises from the pandemic, it will be crucial to harness these major tenets of our economy to truly deliver
levelling up within our region and across the UK.
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2
Emerging Policy Considerations
THEME KEY FINDINGS
The easing of lockdown in recent weeks has provided a much-needed boost to many businesses and local
economies. There have been reports from business groups of a general feeling of entrepreneurial spirit with
businesses starting to return to more “normal” activity.
The relative buoyancy is reflected in recent surveys and monitors, such as the latest Business Barometer from
Lloyds Bank Commercial Banking. This suggested that business confidence was up, surging across the East
and West Midlands in April. Additionally, the number of permanent and temporary staff accelerated during
April, reflecting increasing business confidence in market demand.
Outlook Despite the more positive outlook, there is still concern in the region around potential job losses once the
Government’s furlough scheme finally comes to an end in September. This is particularly relevant given that
companies will soon have to contribute more to furlough pay. Additionally, localised economic shocks in
manufacturing, namely the sale of 3 West Midlands Liberty Steel premises, the closure of GKN’s Birmingham
factory, and the shortage of semi-conductors in automotive, threaten jobs and could dent recovery.
Returning to normality through recovery is a priority for all businesses, and there is a need for national and
local government to support businesses with this. The recently delivered Queen’s Speech has offered some
post-Covid reassurances according to business leaders, but key now will be on how key priorities of skills,
planning, and transport will be delivered in reality – supporting the realisation of levelling-up.
Businesses and the public are pleased with the progress on the government’s roadmap, particularly the
ability for hospitality to operate. However, success has been hampered by poor weather, and there are still
many businesses in hospitality and beyond that are unable to open or operate as normal. Firms welcomed
the continued easing of restrictions from 17th May, but achieving full operation in June is greatly
anticipated.
Despite cautious optimism in the business environment, many issues surrounding Covid-19 still exist, not
least the recent worry and uncertainty surrounding the Indian variant and its impact on the easing of
restrictions roadmap. Concurrent Covid-related issues highlighted by local business in recent weeks include:
• Sectors such as events/conference are really struggling and have no clear roadmap as to when they will
be able to trade again.
Covid-19 • Some businesses are struggling with the short term cashflow issues whilst bringing back staff and
preparing to restart. Some of these are delaying the reopening of business, particularly restaurants.
• Many SME’s still awaiting outcomes from underwriting from late applications to the CBILS loans scheme.
Not a clear picture yet from loan providers on the new Recovery Loan scheme.
• General resistance from businesses to spend / invest.
• Firms are discovering high turnover of staff and costs due to Covid absences, and with no financial
support to help with this absence.
• Lack of confidence in attracting new customers and marketing their business in a digital world.
Many of the issues described reflect a continued inability for businesses to plan ahead and forecast for
opportunities and challenges. Given the period of uncertainty and the challenges they have faced with the
pandemic, forecasting for the next year accurately is proving to be a challenge.
While there appears to be a gradual decline in the level and severity of EU Exit / trade related issues
reported by businesses, problems still remain. Recently these have included:
• Continued delays with shipments of exported goods and imported parts and supplies. One example
discussed highlighted a 1-week process now takes 2 months.
• Rising import costs have meant renegotiating contracts with customers.
• Continued lack of understanding on import / export documentation causing delays.
EU Exit • The shortage of steel has been highlighted and the knock-on effect of increased prices.
• A reduction of some business relating to Northern Ireland border concerns.
This suggests that challenges some thought to be “teething problems” are actually structural long-term
changes to the UK’S relationship with the EU. These “on the ground” business issues may be now coming
through in trade data recently released. Reported on 25th May, the total volume of trade between the UK
and the EU plunged nearly a quarter in the first three months after the end of the Brexit transition
agreement.
• With both new and historic growth plans being (re)visited, business support conversations around general,
non-COVID related, support programmes continue to become more frequent in the Midlands.
Enquiries
• The main areas that companies are looking at are diversifying the product range, looking at opportunities
in new markets, and applications for the purchase of capital, green and digital equipment.
Global and National Outlook
Global National
At the end of May, ONS released the latest GVA (for
According to the UN World Economic Situation and
2018-2019). The UK average was 3.5% GVA growth.
Prospects (WESP) mid-2021 report, following a sharp
London and the South East were the highest performing
contraction of 3.6% in 2020, the global economy is
regions (+4.4% and +4%), but the West Midlands had the
projected to expand by 5.4% in 2021. Amid rapid
slowest growth of all at 2.3%. The East Midlands
vaccinations and continued fiscal and monetary support,
increased by 3.4% but still below the UK average.
China and the United States are on the path to recovery.
In contrast, the growth outlook in several countries in The latest ICAEW National Business Confidence monitor
South Asia, sub-Saharan Africa, Latin America and the has found that Business Confidence has reached record
Caribbean remains fragile and uncertain. For many levels, as the success of the UK vaccine programme and
countries, economic output is only projected to return to declining infection rates increase hopes that large parts
pre-pandemic levels in 2022 or 2023. of the economy will reopen later this year. Whilst the
economy is beginning to improve and greater numbers
The International Monetary Fund Fiscal Monitor
of people are returning to work after lockdowns, there is
highlighted the importance of scaling up the global
still a significant proportion of the workforce furloughed.
vaccination effort as it will save lives and eventually pay
for itself with stronger employment and economic The Progressive Policy Think Tank (IPPR) found that the
activity. Until the pandemic is brought under control poverty rate among working households in the UK was at
globally, fiscal policies must remain flexible and its highest rate since 1996. There had been an increase
supportive, while keeping debt at a manageable level in relatively poverty in working households from 13% in
over the long term. Governments also need to adopt 1996 to 17.4% in March 2020. This is due to a
comprehensive policies, embedded in medium-term combination of low wage rises and spiralling costs of
frameworks, to tackle inequalities. living, such as soaring property prices, private sector rent
hikes, and crippling child care costs. Concerningly,
The Global Economic Monitor by the PHD Research
working families were increasingly forced to adopt
Bureau: PHD Chamber of Commerce and Industry,
unhealthy lifestyles and seek high cost credit to pay
updated in May, found that the worst may be over for
debts.
various countries, but the threat posed by recurrent
COVID-19 outbreaks still presents a risk to the growth The largest increases in poverty were seen in London
rate of a few countries. and Wales. Working poverty rates among families with
three or more children were the worst of any family
The economic health of the manufacturing sector, as
group, up more than two-thirds over the past decade to
implied by manufacturing PMI, showed an increasing
reach 42%, though single parents and couples with a
trend in major economies in April 2021. The IHS Markit
single earner also suffered sharply declining disposable
US Manufacturing PMI was revised slightly lower to 60.5
incomes. However, as childcare costs are excluded from
in April of 2021; still, the reading indicated a robust
the official figures provided by the government, it is
improvement in the health and the steepest since data
likely the situation is actually worse than it appears and
collection began in May 2007. Eurozone Manufacturing
there are far more working families in poverty.
PMI stood at 62.9 in April 2021, signalling the fastest
pace of expansion in the manufacturing sector since data The CBI reported that UK Manufacturing output grew at
collection began in June 1997. Trade balance in major the fastest rate since December 2018 – the first material
economies in the global ecosystem recorded a mixed growth reported in almost two years – according to the
trend. The trade surplus of China, Russia and Brazil CBI’s latest monthly Industrial Trends Survey. Looking
increased; UK’s trade deficit increased, whereas US and ahead, manufacturers anticipate output to accelerate
India’s trade deficit widened; and Canada’s trade gap further in the next three months. Total order books also
increased. As countries face a health crisis, climate improved to their strongest since December 2017, and
change threats, and an unfolding education crisis, policy were reported to be “above normal” for the first time
measures need to be prioritised; and the composition since February 2019. Price growth is expected to pick up
and quality of policy measures and reforms will reshape rapidly in the coming quarter, with expectations at their
the future and will matter even more than in the past. strongest since January 2018. 4
Business Activity
Business Activity Index Exports
The West Midlands Business Activity Index increased from The West Midlands Export Climate Index increased
60.7 in March 2021 to 65.9 in April 2021, which is the from 55.8 in March 2021 to 57.3 in April 2021; this
sharpest increase of business activity since records began shows the most favourable export conditions in eleven
in January 1997. The latest growth reported was years. The East Midlands Export Climate Index
associated with the ongoing easing of COVID-19 demonstrated its strongest improvement since
restrictions boosting the demand for goods and services. February 2018, increasing from 54.7 in March in 2021
to 55.7 in April 2021.
The East Midlands Business Activity Index increased from
54.0 in March 2021 to 56.7 in April 2021. This rate of Capacity
output growth was the fastest since September 2020 due
to greater client demand and increasing new order The West Midlands Employment Index increased from
inflows, along with the ongoing easing of COVID-19 52.9 in March 2021 to 55.9 in April 2021. This rate of
restrictions boosting customer spend. expansion was the quickest since September 2017. The
East Midlands Employment Index increased from 50.6
The following graphs show the West Midlands and East in March 2021 to 52.2 in April 2021, the quickest rate
Midlands Business Activity Index trends: of expansion since November 2018.
The West Midlands Outstanding Business Index
increased from 55.5 in March 2021 to 59.7 in April
2021. The East Midlands Outstanding Business Index
increased from 51.9 in March to 53.3 in April 2021.
Prices
The West Midlands Input Prices Index increased from
69.9 in March 2021 to 72.3 in April 2021 - the rate of
inflation quickened to the fastest in ten years. The East
Midlands Input Prices Index increased from 70.2 in
March 2021 to 71.0 in April 2021– the sharpest rate of
inflation since February 2017.
The West Midlands Prices Charged Index increased
from 57.7 in March 2021 to 58.1 in April 2021,
reflecting an output price increase sharper than at any
other time in nearly three-and-a-half years. The rate of
increase in prices changed slightly for the East Midlands
Source: IHS Markit, NatWest PMI, May 2021 from 58.8 in March 2021 to 58.6 in April 2021, although
Out of the twelve UK regions, the West Midlands region this was still the second-sharpest increase for ten years.
was the highest and the East Midlands was the fourth Outlook
lowest for the Business Activity Index in April 2021.
The West Midlands Future Activity Index increased
Demand from 80.2 in March 2021 to 80.8 in April 2021 –
reaching the highest level since records began in mid-
The West Midlands New Business Index increased from
60.6 in March 2021 to 67.2 in April 2021. This rate of 2012. Business confidence in the East Midlands was at
expansion was the sharpest and the quickest since records the highest since September 2015. The East Midlands
Future Activity Index increased from 79.3 in March
began in January 1997. The upturn in the New Business
Index was associated to the ongoing easing of COVID-19 2021 to 79.7 in April 2021. The positive expectations
for the upcoming twelve months are linked to the
restrictions, increased client activity, and strengthening
demand. The East Midlands New Business Index increased ongoing easing of COVID-19 restrictions, new work, and
from 54.6 in March 2021 to 56.2 April 2021. The rate of diversification.
expansion was strongest in August 2020, reportedly due Out of the twelve UK regions, the West Midlands came
to greater client demand. in at fourth highest and the East Midlands was sixth
highest for the Future Business Activity Index in April
Source: IHS Markit, NatWest PMI, May 2021. 2021. 5
Claimants
There were 416,405 claimants aged 16 years and over in the Midlands Engine area in April 2021, a decrease of 4,955
claimants since March 2021. This equates to a decrease of 1.2% for the Midlands Engine area, whilst the UK
decreased by 1.0%. There are 194,865 (+88.0%, UK +108.7%) more claimants when compared to March 2020.
The number of claimants as a percentage of residents aged 16 years and over was 2.7% (UK 2.4%) in March 2020, this
has increased to 5.0% in the Midlands Engine (UK 4.9%) in April 2021.
Claimants as Percentage of Residents Aged 16 Years and Over in April 2021:
Out of the 1,511 wards within
the Midlands Engine, 408 were
at or above the UK average of
4.9% for the number of
claimants as a percentage of
the population aged 16 years
and over in April 2021.
The top three wards for the
number of claimants as a
percentage of the population
were based in Birmingham,
with Lozells the highest with
18.1%. This is followed by
Handsworth at 17.8% and then
Birchfield at 16.7%.
There were 83,235 youth claimants (16-24 years old) in the Midlands Engine area in April 2021 – a decrease of 1,090
claimants since March 2021. This equates to a decrease of 1.3% with the UK decreasing by 1.6%. Since March 2020
(44,195 claimants), the number of youth claimants has increased by 39,040 (+88.3% compared to +108.5% for the
UK).
The number of claimants as a percentage of residents aged between 16 and 24 years old was 3.8% (UK 3.4%) in
March 2020, this has increased to 7.2% in the Midlands Engine and 7.1% for the UK in April.
Claimants as Percentage of Residents Aged 16 – 24 years old in April 2021:
Out of the 1,511 wards within
the Midlands Engine, 610 were
at or above the UK average of
7.1% for the number of
claimants as a percentage of
the population aged between
16-24 years old in April 2021.
The top wards for the number
of claimants as a percentage of
the population was in
Mablethorpe at 19.6%, East
Park at 18.1% and then
Handsworth at 17.5%.
Source: Department for Work and Pensions, May 2021 6
Furloughed Workers
UK Summary: Provisional estimates show this was still true at 31st
Figures released in May 2021 show the level of demand March 2021 with 58% of these employers having staff
and application of furlough in the last year. Furlough in furloughed.
the UK peaked at 8.9m workers on 8th May 2020, with Midlands Engine Summary:
the number of workers furloughed steadily dropping
through June to October 2020. The number of workers Analysis over time shows that across the Midlands Engine st
furloughed increased throughout November 2020 to there were 740,000 employments furloughed on the 31
January 2021. The latest provisional figures show there July 2020, with the figure decreasing between August and
has been a decrease in levels of furlough between October 2020. There was an increase in the number of
February and March 2021 – from 4.7m on 28th February employments furloughed between November 2020 to
to 4.2m on 31st March. The total number of January 2021 and the latest provisional data shows that
employments furloughed in the UK between 23rd March between February and March 2021 there was a decline
2020 to 28th February 2021: from 635,000 to 566,000. In March 2021, this equated to
a 13.0% take-up of eligible employments for the scheme,
compared to the UK average of 14.3%.
Total number of employments furloughed in the
Midlands Engine at the end of each month:
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
31st 31st 30th 31st 30th 31st 31st 28th 31st
Source: HMRC CJRS data Jul Aug Sep Oct Nov Dec Jan Feb Mar
Figures show that, as of the 31st March for the UK, those As of 31st March 2021, there was a higher percentage of
aged 25-34 years old accounted for the highest females furloughed, 13.8% (300,200), compared to
proportion of the total number of employments males, 12.1% (265,900). This matches the UK trend at
furloughed at 21.9% (920k), followed by employees aged 14.4% for females and 13.4% for males.
35-44 years old at 19.6% (824k) and then employees
Across the Midlands Engine area, as of the 31st March
aged 45-54 years old at 18.6% (779k).
2021, the sector with the highest number of
Across the UK as at 31st March 2021, employers with 20- employments furloughed was accommodation and food
49 employees were most likely to have claimed services at 130,430. Total number of employments
under CJRS to support the furloughing of staff, with 62% furloughed by broad sector for the Midlands Engine
of employers of this size having at least 1 employee area on the 31st March 2021:
furloughed. Education, 18,940 Health and social work,
Arts, entertainment and recreation, 38,160
21,500
Administrative and support services, 41,600
Other service activities, 28,800
Professional and scientific and technical, 31,980 Public administration and defence; social security,
Households & Other, 7,760
Information and communication, Financial and
Agriculture, forestry and fishing, Mining and
insurance & Real estate, 21,780
quarrying, Energy production and supply &
Water supply, sewerage and waste, 5,330
Accommodation
and food services, Manufacturing, 56,430
130,430
Wholesale and Construction, 25,390
retail; repair of
motor vehicles,
116,920
Transportation and storage, Source: HMRC, Coronavirus Job
21,380 Retention Scheme statistics: May 2021 7
ONS - Business Insights and Conditions Survey
Final results from Wave 30 of the Business Insights The following chart shows for West Midlands and East
and Conditions Survey (BICS). midlands businesses how long their cash reserves would
last:
Trading and Financial Performance
West Midlands figures show that fewer than 1% of East Midlands 17.7% 14.7% 45.4% 14.8%
businesses and 1.1% of East Midlands businesses have
permanently ceased trading, while 95.5% of West
Midlands businesses and 95.4% of East Midlands
businesses have continued to trade. 4.0% of West
Midlands businesses and 3.5% of East Midlands West Midlands 19.4% 14.6% 42.3% 17.6%
businesses have temporarily closed or temporarily
paused trading.
0% 20% 40% 60% 80% 100%
32.7% of trading businesses in the West Midlands and
No cash reserves Less than 1 month 1 to 3 months
29.1% of East Midlands businesses reported their
4 to 6 months More than 6 months Not sure
turnover had decreased by at least 20%.
The following chart shows how business turnover has International Trading
been affected in the West Midlands and East
Midlands: 3.1% of West Midlands and 1.8% of East Midlands
businesses continuing to export found that within the last
Turnover has increased
by more than 50% two weeks they had not been able to export. Meanwhile,
1.4% of business in the West Midlands and 1.6% of East
Turnover has increased
between 20% and 50%
Midlands businesses had not been able to import within
the last two weeks.
Turnover has increased
by up to 20% 26.0% of exporting businesses in the West Midlands, and
26.8% for the East Midlands reported their businesses
Turnover has not been
affected were still exporting but less than normal. Of those
businesses who continued to trade and import, 20.9% in
Turnover has decreased
by up to 20%
the West Midlands and 22.7% in the East Midlands were
importing less than normal.
Turnover has decreased
between 20% and 50% 57.4% of West Midlands businesses and 57.9% of East
Midlands businesses who were exporting reported that
Turnover has decreased
by more than 50% they had not been affected and 61.2% of West Midlands
West Midlands
importers and 60.5% of East Midlands importers said that
East Midlands
Not sure importing had not been affected.
3.1% of businesses in the West Midlands and East
0% 10% 20% 30% 40% 50%
Midlands are exporting more than normal. The figures for
importing more than usual are 4.9% for the West
Profits Midlands and 4.1% for the East Midlands.
Businesses were asked in the last two weeks how
profits compared with normal expectations for the time Supply Chains
of year. 33.3% of businesses in the West Midlands and Businesses were asked if they had made changes to
29.1% of East Midlands businesses reported profits had supply chains due to the end of the EU transition period.
decreased by at least 20%. 6.5% of responding West Midlands businesses and 7.2% of
Cash Reserves East Midlands businesses reported they had. Where
businesses stated they had made changes, 48.2% of West
2.8% of West Midlands businesses and 4.3% of East Midlands businesses and 44.4% of East Midlands
Midlands businesses have no cash reserves. businesses reported they were using more UK suppliers.
Source: ONS, Business Insights and Conditions Survey 8
ONS - Business Insights and Conditions Survey
The following chart shows where West Midlands Safety Measures and COVID-19 Testing
businesses and East Midlands businesses had reported
87.8% of responding West Midlands businesses and
they had made changes to supply chain, what the
84.3% of East Midlands businesses reported they were
change was:
using, or intending to use social distancing as a safety
Using more UK suppliers
measure in the workplace.
The following graph shows for the West Midlands and
Using more EU suppliers East Midlands what businesses are using or intending to
use for safety measures in the workplace:
Using more non-EU suppliers
Adjusted working practices
Moving the supply chain away Coronavirus (COVID-19)
from the short straits crossings vaccinations
Hygiene measures
Increasing the diversity in suppliers
Personal Protective
Equipment (PPE)
Expanding to different modes
of freight Social distancing
Other Temperature checks
Other
Not sure West Midlands
East Midlands None of the above
East of England West Midlands
0% 10% 20% 30% 40% 50%
Not sure
Business Confidence and Insolvency 0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
In the West Midlands, 68.4% of responding businesses 62% of responding West Midlands businesses and 63.5%
and 71.3% of East Midlands businesses had high of East Midlands businesses reported they were not
confidence in surviving over the next three months. providing regular COVID-19 testing for the workforce.
24.0% of West Midlands business and 22.2% of East
Midlands businesses had moderate confidence of Skills Demand
survival, 2.0% of West Midlands businesses and 1.9% of
Businesses could select multiple options for the top three
East Midlands businesses had low confidence.
increases in skills demand. The results show that 19.7% of
1.0% of responding West Midlands businesses and less West Midlands businesses and 18.9% of East Midlands
than 1% of East Midlands businesses reported they businesses saw an increase in demand for management
were at severe risk from insolvency. 9.3% of West or leadership skills. 19.6% of West Midlands businesses
Midlands businesses and 9.5% of East Midlands and 19.0% of East Midlands businesses reported an
businesses reported they were at moderate risk. 52.4% increase in demand for soft skills and 17.2% for West
of West Midlands businesses and 52.3% of East Midlands and East Midlands businesses reported an
Midlands businesses reported a low risk of insolvency. increase in basic digital skills.
28.3% of West Midlands and 30.3% of East Midlands
businesses reported no risk. To note: In the West Midlands there was a response rate of
24.9% and in the East Midlands a response rate of 25.6% where
Expected Site Closures and Redundancies businesses have a presence in the region. There was a response
rate of 23.8% (WM) and 26.0% (EM) where businesses are
2.0% of West Midlands businesses intend to
headquartered in the region. Businesses were asked for their
permanently close business sites in the next three experiences for the reference period 19th April to 2nd May 2021.
months. However, for questions regarding the last two weeks, businesses
may respond from the point of completion of the questionnaire
5.9% of West Midlands businesses and 4.5% of East
(3rd to 16th May 2021). Please note the data used is unweighted
Midlands businesses expected redundancies to happen and should be treated with caution when evaluating the impact
within the next three months. With 8.1% of West of COVID-19. Due to weighted data being available for the UK a
Midlands businesses and 6.0% of East Midlands comparison has not been included.
businesses expect redundancies to occur within the
Source: ONS, Business Insights and Conditions Survey 9
next two weeks.
Local Business Intelligence
This section draws on contributions from the East Manufacturing - Make UK
Midlands Chamber, Make UK, the NFU, FSB, Growth
Manufacturing in the Midlands (and particularly the East
Hubs and Universities across the region (sourced from
Midlands Innovation and Midlands Enterprise Midlands) is looking more positive than has been the
Universities networks). case for some time – this is reflected in order books and
planned investment. Most manufacturers in the
East Midlands Overview Midlands now report that they are operating at or near
Emerging data from the Chambers Quarterly Economic to pre-pandemic levels.
Survey points to the most positive picture of business Usage of the Furlough Scheme by manufacturers is now
confidence for some time: reported to be very low.
• Sales have picked up – particularly in domestic Midlands manufacturers continue to report disruption to
markets. their operations as a result of EU exit. Indeed, three
quarters of manufacturers are reporting that their supply
• Manufacturing is reported as being in the strongest
chains are being disrupted by international trade issues.
position for some time – with lots of investment
primed to come forward and very strong order books. Shipping charges have risen markedly in recent months,
as have costs associated with the administration of
• After a sharp fall at the start of the pandemic, both border checks/associated paperwork on goods for
manufacturers and service sector businesses are now
export.
seeing their workforces grow.
Competitors based in Europe are actively seeking to take
• Prices are an issue, particularly driven by raw material market share from UK manufacturers where border
costs (and particularly in manufacturing) – many friction has resulted in interrupted or delayed supply to
expect to start passing these on to customers. European customers.
• There is growing concern about firms’ ability to There is now a growing trend towards UK manufacturers
recruit workers with the skills necessary to support establishing warehousing and distribution facilities
future growth. within the EU in order to maintain just-in-time supply to
European customers. This is requiring investment in
• Recruitment difficulties are anticipated across all skill inventory and premises. It is likely to result in the
levels and broad occupational groups. offshoring some employment that would otherwise be in
• Cashflow remains a significant concern to many the UK.
businesses. Upward pressure on materials costs are now widespread
– particularly for manufacturers reliant on international
• Investment intentions reported previously remain
supply chains for raw materials and/or components.
strong.
Specific concerns have been raised in relation to supplies
• Cost pressures relating both to raw materials and of steel, timber, polypropylene and glass. Concerns
overheads are a growing concern. about supply of raw materials is also notable.
Some manufacturers have reported problems in
• Business confidence in relation to both future
recruiting new staff (even unskilled). It has been
turnover and profitability is high – albeit that these
suggested that this may be, in part, an unintended
are improvements from a low base.
consequence of the continuation of the Furlough scheme
Less positively, intelligence from insolvency practitioners (necessary though this was) that may have dampened
is suggesting that the requirement to commence activity in the labour market.
repayment of support loans and the planned end of the
furlough is likely to lead to an increasing volume of
business closures in future months.
10Local Business Intelligence
Small Business – FSB FSB highlighted this issue in its Spring budget submission.
While we await progress nationally, Midlands FSB
The FSB quarterly Small Business Index (SBI) survey,
members continue to report barriers to public sector
published in April, has shown that in the East and West
procurement opportunities.
Midlands, there has been a marked rebound in small
business confidence. In fact, the East Midlands has There is considerable inertia in the jobs/recruitment
returned the most confident responses in the UK, with the market. Small businesses are struggling to find the talent
West Midlands running a very close second – both ahead they need – despite worthwhile initiatives such as
of all other UK regions. Small firms said they were more Kickstart and apprenticeships – while local providers are
resilient. Small firms reported increasing revenues. The reporting frustration at their inability to incentivise
majority expect revenues to increase over the next individuals to explore new job opportunities.
quarter. The majority also aspire to grow their firms over
the next 12 months. On a similar theme, FSB have repeated calls for the jobs
retention bonus to be reinstated so that employers are
The FSB suggest that these indications bode well for the encouraged to bring furloughed staff back to work rather
future - providing there are no diversions from the than being made redundant. FSB continue to call for
Government’s planned roadmap for reopening the reform to employer national insurance. They believe this
economy. is necessary if the end of furlough is not to result in
significant unemployment. Local intelligence from
During this reporting period, the Federation of Small
members suggests this is a particular risk in the
Businesses has focused its campaigning around three key
Midlands.
issues that reflect the needs of small businesses:
Farming – NFU
1. get the COVID-19 grants paid out quickly (a call to
local and national government/policymakers); The sector is anticipating positive impacts associated
with the phased re-opening of hospitality and tourism in
2. get the customers back safely (a call to local
line with the Government ‘road map’. The former will
businesses and their customers); and
benefit farmers supplying the hospitality/catering sector;
3. get the bills paid promptly (a call to all those the latter will benefit the many farm businesses that
commissioning goods and services that are delivered have diversified into tourism – particularly the
to specification, to pay for them in a fair, fast and ‘staycation’ market.
fitting way).
Concerns are being voiced within the sector about the
FSB welcomed Queen’s speech commitments to much- impact that the UK’s new immigration system will have
needed levelling-up initiatives, which will hinge on their on the availability of seasonal labour later in the year.
ability to reach the 5.9 million small businesses and sole Specific concerns are being raised about the exclusion of
traders that drive our economy nationally, and the c. the ornamentals sector from the Seasonal Worker Pilot –
400,000 enterprises - or roughly seven per cent, that in its current form, the scheme only applies to edibles.
operate from the Midlands area.
Lamb producers are reported to have benefited from
To make good on these announcements, FSB are now strong prices in recent weeks.
calling for progress on transport and broadband
Concerns are widespread within the sector about the
infrastructure improvements, the lifetime skills guarantee
potential impact of an FTA with Australia that could
and, crucially for this forum, bringing more small
disadvantage smaller UK producers relative to the much
businesses into public procurement processes. On that
larger feedlot producers of Australia.
last point, FSB report an insurance industry market failure
relating to the costs of Professional Indemnity insurance. A key issue for the future development of rural
This is coupled with an on-going, ‘standard’ public sector economies post-Brexit/RDPE will be the shape of the
process of demanding unreasonably high levels of cover Shared Prosperity Fund and the manner in which it
(£millions) for even modest cost/low-risk work. These two addresses the needs of agriculture and the wider rural
factors need to be resolved if more small businesses are to economy.
be encouraged, indeed enabled, to bid for public sector
11
contracts with any degree of confidence.Local Business Intelligence – By Sector
SECTOR KEY FINDINGS
Outlook
• Manufacturing output grew at the fastest rate since December 2018 – the first material growth
reported in almost two years – according to the CBI’s latest monthly Industrial Trends Survey. The
survey of 272 manufacturers found that output increased in 12 of 17 sub-sectors, with growth driven
by chemicals, electronic engineering, and metal products.
• However, a wave of potential closures is more concerning news. Liberty Steel is set to sell three
plants across the West Midlands - in West Bromwich, Coventry and Kidderminster – as part of a
restructure, while GKN will close its Birmingham factory in 2022 despite an attempt to save it.
• More positively, a full planning application has now been submitted for a new world-class
manufacturing research centre in Derby.
Advanced Skills
Manufacturing • Through MakeUK, the manufacturing industry has recently called for a targeted sectoral approach
& Engineering on Apprenticeship funding. They are recommending:
- Targeted approach with flexibility of spending needed to create and support high value
apprenticeships in high growth sectors like manufacturing.
- In the next 12-18 months, extend the lifetime of the funds from 24-36 months for a period of one
year to help post Covid recovery.
- To boost apprentice recruitment, allow 20% of levy funds to be spent on capital costs
EU Exit / Covid-19
• The global shortage of semiconductors, which led to Jaguar Land Rover to temporarily close plants in
the North West and West Midlands, will cost car makers almost £80bn in lost revenue this year.
• According to the Food & Drink Federation (FDF), inconsistent and increasingly burdensome post-Brexit
bureaucracy is blighting food and drink sales to the EU, as it published analysis showing exports to the
bloc were down 40 % in February compared with a year earlier.
Outlook
• The Midlands recorded the largest regional share of logistics take-up in the UK during the first
quarter of 2021, according to new research from CBRE. Total by sector take-up of big box logistics
Logistics &
units was 5.2 million sq. ft in Q1 2021, of which 34.5 per cent was in the East and West Midlands. In
Transport
the East Midlands, following strong demand for space in 2020, Q1 take-up dropped 65 per cent to
just under one million sq. ft, compared to the previous quarter. This mirrors the national picture,
where quarter-on-quarter take-up fell by 49 per cent.
EU Exit / Covid-19
• The British building industry is in the midst of a supply crisis. From roof tiles to steel, timber to
insulation, paint to kitchen sinks, products are scarce and, when found, they’re expensive.
• Timber costs 80% more than it did in November, steel joists are more expensive because iron ore
Construction
has gone up by more than 80%. Soft wood is up by almost 100%. Aluminium is up by about a
quarter. Copper is up 40%. Plastics up 60%. Paints are up by about a third.
• A combination of Covid and Brexit has caused the crisis, while delays to global supplies caused by
March’s Suez crisis have not helped either. They are affecting projects big and small.
Outlook
• Restaurants and bars are reporting strong demand as lockdown measures ease.
Hospitality and • However, the industry is struggling to recruit enough staff meaning that some premises are unable to
Entertainment fully reopen or operate with reduced hours.
• Figures suggest more than one in ten UK hospitality workers left the industry in the last year.
Recruitment site Caterer.com said the pandemic and Brexit were to blame.
Outlook
• There have been mixed results from retail in recent weeks. On the one hand, UK consumer spending
rose above pre-pandemic levels for the first time in 2021.
• However, recent closures (such as Debenhams) and results from other retailers such as Shoezone
bring home the perilous position of the sector, reflected in waves of high street closures across
Midlands towns – such as at Mansfield’s Four Seasons Shopping Centre.
Retail
• Additionally, footfall remains around 20% down in city centres due to the continued lack of office
workers. This has prompted some ideas from the business community to help boost visits to centres:
- Calls for flexible season ticket models from train companies to enable more people to return to the
office when they wish.
- Requests from SMEs in various sectors for funding and support for getting Covid safe. Costs are
considerable but essential for staff and customers to feel safe.UK Prosperity Index
The Legatum Institute (Centre for UK Prosperity)
launched the UK Prosperity Index. It is a tool that can be
used to better map and monitor the pathways toward
prosperity in all corners of the UK. Drawing on a wealth
of data, the Index is designed to map current levels of
prosperity at the local authority level, how they have
evolved over the past decade, and how they will
continue to track in the years ahead. The Index,
supported by dozens of advisors and updated annually,
will not only help decision-makers ‘level up’ the country
and unlock prosperity, but also track progress over time.
The UK remains one of the most prosperous nations in
the world and is well positioned to prosper in the future.
But currently, its overall prosperity has plateaued. Since
prosperity peaked in 2018, every region, excluding Prosperity is also being undermined by significant
London, has reported an overall decline in prosperity. increases in violent crime, including homicides, sexual
Overall, the UK is continuing to build a strong and open offences, and also an increased frequency of terrorist
economy. It has achieved big improvements in the attacks such as recent attacks in London and
quality of its infrastructure, labour force engagement, Manchester. Deterioration in the overall safety and
and competitiveness. But these gains are currently being security of communities has occurred across 13 of 15
undermined by a deterioration in several specific areas: regions in the UK, including more than ¾ of all LAs.
in the quality of conditions for local enterprise, which are
needed to bolster business dynamism and
entrepreneurialism; in the safety and security of
communities, which are struggling with increasing
violent crime; in the physical and mental health of
people; in key indicators of social capital, including
weaker family relationships, evidenced by an increase in
looked after children; and, to a lesser extent, in the
quality of local governance. The regions that have
suffered the sharpest overall decline in prosperity in the
last five years include Merseyside and the non-
metropolitan areas in the North West.
Over the last decade, the quality of local investment
environments—which measures aspects such as
investment demand and the extent to which businesses
Key aspects of social capital are also deteriorating. The
are satisfied with finance arrangements—has
strength of families appears to be weakening. There are
deteriorated in 11 of 15 regions. Furthermore, 43 of the
rising numbers of looked after children and children on
50 areas with the strongest investment environments
protection plans, as well as a slight decline in the number
are in London and the South East, while 27 of the 50
of times a week that families eat together. Before Covid-
weakest are found in Scotland.
19, there was also a decline in the strength of people’s
The UK’s pathway to prosperity is being undermined by a social networks and a fall in institutional trust.
marked deterioration in its enterprise conditions. Many
All regions within the UK have also seen their
businesses report a deterioration of local conditions for
environment improve, including reductions in emissions
enterprise, including skill shortages and barriers to doing
and exposure to air pollution. The decreases in CO2
business. Things that help to drive enterprise, such as
emissions in the UK are encouraging, with decreases
flexible local labour markets, are also deteriorating.
from industry, commercial sources and transport. These
Some areas are experiencing significant challenges in
decreases are a result of the changes in fuel mix from
productivity, competitiveness and dynamism.
coal to gas and renewable sources of electricity
generation, as well as reduced energy use by businesses.
13UK Prosperity Index
Metropolitan Regions
The analysis shows that metropolitan areas (West
Midlands metro, Greater Manchester and Merseyside)
are the least prosperous in the UK, and are made up
primarily of Industrial Heartlands local authorities, and
two Post-Industrial Urban local authorities. They have
higher crime rates, weaker Social Capital, and weaker
institutions than other areas of the country. They have
reasonably vibrant and dynamic economies, particularly
the West Midlands metropolitan area. Furthermore,
these areas have high rates of poverty, poor health
outcomes, and relatively poor educational outcomes.
• The West Midlands metropolitan area has the UK’s highest rate of firearms offences and the highest rate of people
saying there is a big problem with anti-social behaviour, at 17% (compared with the UK average of 7%).
• All three metropolitan areas (West Midlands metro, Greater Manchester, Merseyside) show low social tolerance
when asked about different classes and ethnic groups, although Merseyside metropolitan shows more tolerance
toward different religions
• Many local authorities in the three metropolitan areas are among the weakest performers when it comes to their
overall effectiveness, such as the collection of council tax and efficiency of housing benefits
• Social Capital is also low in these areas—they tend to have weak social networks, low rates of civic and social
participation and weak family relationships
• Infrastructure is an area of strength for these three metropolitan areas. The West Midlands metropolitan area has
an average download speed of almost 90 Mb/s, and over 97% superfast broadband availability. These areas
benefit from extensive road networks, and generally, the roads are in good condition
14UK Prosperity Index
West Midlands Non-Metropolitan Area
Prosperity in the West Midlands non-metropolitan area
is similar to the UK average. The region is a
predominantly rural area, with Worcester and Stoke-on-
Trent the only authorities that are classically urban
archetypes—a Mid-Sized Urban Hub and Post-Industrial
Urban area, respectively. The strengths of this region
include the quality of Governance, its Safety and
Security, and high Social Tolerance. There is a contrasting
trend in Infrastructure, Education, and the Natural
Environment where, despite improvements, the region
still performs worse than the UK average.
15UK Prosperity Index
East Midlands
Prosperity across the East Midlands is varied. Overall, the
East Midlands has low crime, high levels of personal
connectedness, low rates of poverty, good provision of
housing and low rates of mental ill-health. Living
Conditions in the East Midlands are better than
average—but Health, Education and the Natural
Environment are weaker than average. Rural England
areas and the North Midlands are more prosperous than
the UK average, while urban areas have lower
prosperity.
16Reviving Regions
Introduction
The UK has a productivity challenge. Productivity growth has stagnated since the financial crisis, with the knock-on
impact of low wage growth and growing inequalities, which the CBI explored in Reviving Regions 2020 report. The CBI
have now expanded upon the report by publishing regional-specific scorecards and growth priorities.
West Midlands Region
The West Midlands is a diverse economy with expanding financial, digital and life sciences sectors all underpinned by
strong manufacturing. However, the region is ranked 6th out of the nine English regions for productivity (GVA £ per
hour), partially attributed to a low proportion of graduates in the workforce (34.1% of 16–64-year-olds with NVQ4+)
and a low density of high growth firms (4.1%).
West Midlands Scorecard:
The CBI has developed the following growth priorities:
• Identify and close skills gaps by working with business, the Department for Work and Pensions, Department for
Education, local authorities and education providers, to coordinate investment to meet future skills demand in
sectors such as life sciences, digital, automotive and aerospace.
• Improve reliability and capacity of infrastructure by working with stakeholders such as Midlands Connect and
Transport for West Midlands to advocate for investment into key transport corridors such as Midlands Engine Rail
and East-West connectivity.
• Inspire innovative businesses to invest by improving access and supply of public sector backed R&D and
innovation support. The region has been identified as a ‘business-led innovation region’ reflecting the above-
average levels of business investment in R&D, but this is not matched by public sector investment. Showcasing the
benefits of matching R&D private sector investment, would provide an additional £1bn of government and Higher
Education investment.
17Reviving Regions
East Midlands Region
With deep industry roots in the aerospace, rail, automotive, and manufacturing sectors, the East Midlands strength is
in the development of transport technologies and it has sector expertise in complementary technologies such as
composite materials and the application of space technologies.
The region is ranked 8th out of nine English regions for productivity (GVA £ per hour). This can in part be attributed to
low levels school performance with just 86.1% of schools above floor standard. One in three secondary schools have
been judged less than good by Ofsted.
East Midlands Scorecard:
The CBI has developed the following growth priorities:
• Strengthen school and business links by raising the educational aspirations and opportunities of 12–16-year-olds
by embedding the Gatsby benchmarks into strategic planning with stakeholders including the Department for
Education, local authorities, Midlands Engine and education providers.
• Transform reliability and capacity within local and national infrastructure by improving connectivity, particularly
east-west links, major A roads such as A46 and A52, and public transport to and from East Midlands Airport. This
requires raising the profile of strategic routes with stakeholders such as the Department for Transport, Midlands
Engine, Midlands Connect and local authorities to influence and support infrastructure improvements.
• Inspire world-class innovative businesses to invest and locate in the region by championing the region on the
national stage. Working with stakeholders both locally and nationally to raise the profile of the region by
showcasing emerging sectors such as space technology and aerospace manufacturing.
18Levelling Up Rural Britain
NFU Mutual – Levelling up Rural Britain, 2021 report A cross-departmental rural crime task force would
highlights that rural Britain has a key role to play in the support a co-ordinated governmental approach to ensure
developing, implementing and making a success of the coordination between government departments,
new green agenda. There are huge opportunities (as government agencies, Police & Crime Commissioners,
outlined below in ten key areas) for job creation, Chief Constables and local authorities.
generating green economic growth, increasing exports,
and improving health and well-being. Enjoying & celebrating the wellbeing benefits of rural
Britain
Building a world class British food brand at home &
abroad Because of the contribution green access makes to the
physical and mental wellbeing of the nation, farmers’
Engaging and working with government departments efforts to maintain, create or enhance public rights of
would open up all routes to market for British food. Not way as part of a modern network should be rewarded as
only can this benefit the economy, but also have an part of new government farm funding schemes, provided
impact on health. Making the most of overseas markets they recognise the value, and preserve the integrity, of
post Brexit is also crucial. There is more than £60 million land used for food production.
of farmer investment in the Agricultural and Horticultural
Development Board through levies. Industry is ready to Making a positive difference through planning & reform
partner with government to build the British food brand NFU mutual want to work with government to help
identity. develop a new framework that promotes more economic
Climate Smart Farming Leading the World and social activity. Encouraging people to live and work
locally and building more affordable rural housing will
To ensure our farmers can utilise advances and become ensure people can integrate into rural communities,
world leaders in climate friendly farming NFU mutual signalling that Britain is growing more diverse local
want to support the government’s progressive approach economies, and in turn, helping to boost the local and
to the adoption of new technologies, and its pro-science national economy.
agenda. Maintaining Britain’s agricultural science base
through research and development facilities and Inspiring STEM learning through agriculture
education will ensure Britain’s food and farming sector Government has the opportunity to recognise and
continues to be world-leading. promote the role that farming can play in teaching vital
Opening up rural Britain for Business STEM subjects. This would benefit the next generation
and also inspire interest not only in working in Britain’s all
Creating business conditions that make financial important food industry, but future generations of
commitments in rural processing plants attractive would scientists, engineers and mathematicians too.
help to drive further green economic growth and support
the potential of the food and farming sectors to Empowering a British workforce
contribute more, as well as provide more employment As new technologies become available, it is crucial that
opportunities for people living in rural Britain. there is a professional skills pathway available that
Green growth for all via country-wide connectivity recognises, and addresses, the skills, training, and
development needs of the sector and its workforce. It is
Almost every respondent to the 2020 NFU Digital also vital that rural businesses are able to attract and
Technology Survey said access to reliable broadband and retain the workforce they need. Levelling up rural
a mobile signal was essential for their business, yet less services, like public transport, and access to services
than half felt their mobile signal was sufficient for their including high speed internet and medical provision, will
business needs. To help rural communities get access to give greater scope for people to live and work in both
urban and rural areas..
broadband, Shared Rural Network should remain a
priority and be completed by 2025. Rural proofing global Britain
A safer, cleaner, greener rural Britain Rural proofing all primary legislation will help to ensure it
has a positive effect on rural life, the rural economy, and
NFU Mutual’s theft claim figures for 2019 revealed that
help contribute to our shared goals of national prosperity
rural crime cost the UK £54.3 million – the highest cost
and a greener economy.
recorded in eight years.
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